Management Information System (MIS) Practice Exam

What has contributed to the huge increase in outsourcing?

1. Increase in decentralization.

2. Decrease in transportation costs.

3. Increase in advertising costs.

4. Decrease in telecommunication costs.

The correct answer is: Decrease in telecommunication costs.

The significant increase in outsourcing can be largely attributed to the decrease in telecommunication costs. As telecommunication technologies have advanced and costs have lowered, companies have been able to communicate and collaborate with external partners and vendors more efficiently and effectively, regardless of location. This has made it feasible for businesses to outsource various functions, such as IT services, customer support, and manufacturing, to providers that may be located in different countries or regions. With lower telecommunication costs, companies can maintain real-time communication, monitor operations, and manage projects remotely, thereby enhancing the advantages of outsourcing. This development has also allowed for greater flexibility and responsiveness in business operations, enabling firms to focus on their core competencies while relying on specialized external providers for support functions. In contrast, while decentralization might enable firms to outsource more, it is not the primary driver. Similarly, although transportation costs have a role in logistics and global supply chains, it is the advancements in telecommunications that have fundamentally changed how companies can interact with outsourced services. Advertising costs do not directly relate to the outsourcing trend. Thus, the decrease in telecommunication costs stands out as a critical factor contributing to the rise of outsourcing in various sectors.